Why It’s Okay to Tell Your Investors That You Don’t Have a Clue

The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question, “What are some of the biggest misconceptions about startup life?” is written by Mark Achler, lecturer at Northwestern's Kellogg School of Management and managing director of MATH Venture Partners.

Of all of the misconceptions about startup life, I think the most profound—and ultimately damaging—is the myth of the savior leader: the magical CEO who creates the perfect product/service and business model that erupts into a runaway success. The cold, hard truth is that it takes both time and much iteration before most entrepreneurs get it right.

Here are three things most startup founders typically struggle with:

Showing vulnerability
Most CEOs are afraid to admit to their investors and board of directors when they need guidance. They don’t want to look like they’re not in control or don’t have all of the answers.

Smart CEOs surround themselves with experienced investors and board members who have already lived through many of the challenges that they’re going through. The best-run boards spend most of their time in strategic discussion and problem solving. If you aren’t sharing key challenges, you are squandering taking advantage of their collected wisdom. They’ll also probably get suspicious if they suspect you’re withholding key information from them.

I know of a CEO who was having trouble with a key strategic partner who was buying his old inventory. Over the course of a few months, the partner stopped paying for the inventory received. The CEO didn’t tell his board until there was over $1 million due. Not only was this $1 million-dollar loss a tremendous shock to the company, but it put an almost unbearable strain between the CEO and the board because the CEO waited far too long to tell the board, and didn’t get their input early enough to ameliorate the problem.

Getting to know their customers
Most entrepreneurs are typically pretty good at identifying a problem and solving it, but they usually don’t spend enough time with their customers to deeply understand their needs.

One of my companies worked to reimagine the process of medical informed consent from the point of view of the patient—not the doctor. The information was presented in a simple, straightforward way—via a web-based platform—and the patients loved it. We had better-educated patients who complied better with their instructions, had better outcomes, and could no longer sue because they couldn’t claim that no one ever informed them (the program tracked every click of the mouse). The only problem was that the doctors didn’t want to pay for it.

We were stumped—and running out of money. It finally dawned on us that when a patient sues, it’s the medical malpractice insurance carrier for the doctor that bears most of the financial burden. We went to them. They loved it and gave a discount off of the insurance premium equal to the cost of our software if the doctor used it. Eureka! We figured it out—or so we thought.

Only a handful of doctors bought our program. It turns out that changing workflow and process in a doctor’s office is incredibly difficult—even if the software is free. Another year went by before we finally realized that in a lawsuit, it’s the hospital and their malpractice insurance carrier that actually pays the bulk of the claim. We went to them—and we finally had a business. The hospital’s insurance carrier bought it from us. They forced the hospital to use it and the hospital forced the doctors to use it.

We originally thought we were in the patient education business and the doctor was our customer. But we ended up in the risk management business, and the hospital’s malpractice carrier was our customer. We had the same exact product—we just didn’t understand the financial leverage in the model until much later.

Finding the right team
The best CEOs spend much of their time thoughtfully and carefully selecting both their management team and their board. You want a team around you that has deep expertise and skills in areas where you are the weakest. It’s all about execution. We live and die by the quality of the team we surround ourselves with.

You should always be recruiting. At every networking event, every industry conference, and every meeting, you should be considering the people you are interacting with as potential hires. You need to be creative as to where you’re pulling talent from. I’ve always found that the best place to find salespeople is through your customers. They’re interacting with salespeople all day long and will be able to tell you who their favorites are.

Of course, you also need to tap into your investors and board members and their respective networks. And be sure to mine your employee base for their trusted relationships from prior companies.

As you progress on your startup journey, be sure to remember that there is no such thing as the perfect CEO. Just do the best you can and take it one day at a time.